Operational review

PAPER

MANAGEMENT:
Quinton Swart


In the Rest of Africa, Nampak supplies paper packaging to a range of sectors, including the milling, cigarette, tobacco and sorghum beer industries. In most of these markets we are the major producer. Among our extensive product range are beverage cartons, sacks, self-opening bags, corrugated tobacco cases and corrugated boxes.

  FINANCIAL CAPITAL     HUMAN CAPITAL     NATURAL CAPITAL
 

Revenue

(R million)

R1 054 million

(2018: R1 486 million)

   

Employees

577

(2018: 585)

   

Energy use

125 519 GJ

(2018: 104 623GJ)

 

Trading profit

(R million)

R160 million

(2018: R229 million)

   

LTIFR

0.12

(2018: 0.10)

   

Emissions intensity

(t/CO2e/Rm revenue)

5.73

(2018: 3.55)

 

Trading margin

(%)

15.2%

(2018: 15.4%)

   

REST OF AFRICA

Performance

In Zimbabwe, the limited availability of foreign exchange required to procure raw materials and the sharp depreciation of the local currency detracted from a strong operational performance with sustained efficiencies. Sales volumes were broadly steady, supported by a record harvest of tobacco, which is packaged for export in large corrugated cases, as well as sales to Malawi following the restructuring of our business there in 2018. In a hyperinflationary economy, accounting standards require the use of the closing rand/Zimbabwe currency rate rather than the average rate for the year. This led to a sharp decline in the profitability of the paper business.

In Nigeria, we agreed to sell our Cartons business as a large customer moved to consolidate its suppliers across the world.

In Kenya, after a slow first half, volumes began to recover in the second half following the start-up of our higher-quality production facilities, including a new eight-colour printer.

In Malawi, we recorded greater efficiencies and an improved financial performance subsequent to the restructuring of this operation, which now focuses on flame sealing and printing activities for sorghum beer packaging and stitching and printing activities rather than the first stage of production activities. That occurs in Zambia and Zimbabwe respectively.

In a difficult macro-economic environment in Zambia, volumes declined, but we continued to execute on our new market approach to develop more small independent brewers as customers. This approach involves moving away from our traditional reliance on one large customer and towards assisting independent breweries to change their sorghum beer packaging to conical cartons, from bulk and plastic containers previously.

OUTLOOK

Demand for paper packaging in Zimbabwe will only pick up meaningfully if the country introduces substantial economic reforms. We see good opportunities in the larger African market for both fresh, extended shelf-life and ultra-heat-treated (UHT) products, with rapidly expanding demand.

In Nigeria, we await the competition authorities' approval of the sale of our Cartons business.

In Zambia, there are significant opportunities for the growth of conical cartons for opaque beer.